It can be challenging while navigating the murky waters of fluctuating interest rates when purchasing a home in a hot housing market. The extended low rates of the past year might have provided economic relief for homebuyers during that time, but unfortunately, those rates won't necessarily carry over deep into this new year. From the beginning of 2022 and as inflation surges, current mortgage rates continue to rise slowly. If you and your loved ones are browsing for a mortgage, now is the time to see how the increased interest might influence your payments in the coming months. Before consulting with various lenders and deciding on the right home to purchase, take a look at your financial situation and contemplate your personal needs to make sure you receive a favorable outcome.
2022 Forecast-Storm On The Horizon or Clear Sailing?
Many housing experts agree that a couple of factors affect mortgage rates the most and will cause them to increase in the coming months. The main reason for the current escalation in rates is inflation being the highest we have seen in over 40 years. So with inflation rates soaring and the assumption that the Federal Reserve will raise its short-term interest rate very soon to focus on the high inflation while increasing cost to lenders, mortgage rates will continue to rise. Despite how dire this realization might sound, there is no need for borrowers to feel alarmed. Homebuyers who are buying or refinancing must remain focused on their endeavors surrounding their property and not panic about the uptick in mortgage rates. All things considered, mortgage rates remain just as low or even lower than before the COVID pandemic began.
How This Forecast Can Affect You
There is no time like the present to push forward with your housing needs because you can't expect prices to drop anytime soon. With current mortgage rates being similar to the time right before the pandemic, buyers are still in an excellent place to secure a home from their efforts. If you are in the market to purchase a home, and rates continue to rise at this slower pace, figure out your budget and what you can afford in the long run. Also, with the sudden changes in mortgage rates, it's essential to stay in contact with your lender about what you're pre-approved to purchase. Since those pre-approvals will be for a specific payment, the higher interest rate could lead to less buying power. Whatever plan you choose to move ahead with, consider what you'll be paying in advance for closing costs, such as the lender fees, which can raise the amount to refinance.
Step Right Up: Pick A Mortgage, Any Mortgage
There are plenty of options when trying to choose the right mortgage for you and your housing situation in 2022. The most frequent loan term is a 30-year fixed mortgage at around 4.00%, with a lower monthly payment but a greater interest rate than a lesser-year fixed rate. If you can afford a higher monthly payment, you might prefer a 15-year fixed mortgage at an average rate of 3.35% for a better deal in the long run. The longer timeframe will give you a substantial amount of time to pay off your mortgage. With this agreement, you'll most likely receive a lower interest rate while paying off your mortgage earlier and paying less total interest. Still another alternative is an Adjustable-Rate mortgage which can give you a lower interest rate than the 30-year fixed mortgage rate for the first five years. Depending on the terms of your loan, if there are changes in the market after that allotted time, it might cause your interest rate to increase. This mortgage is a good option for borrowers who plan on selling or refinancing their homes before the rates change.
Trust The Trends
While the beginning of 2022 started with lower mortgage rates than we have today, there has been a slow and steady rise that does not appear to make a stop or change course in the foreseeable future. The increase in inflation rates and an economy that continues to regain itself from the past couple of years are two critical factors when considering the rising interest rates. Combined with the Federal Reserve's decision to increase interest rates, these elements will see mortgage prices continue to grow steadily full steam ahead. So remember, if you are a homebuyer who is in the market to find a new home, now is the time to make a move by choosing the best mortgage option that suits your ideas and personal situation while rates are on the rise.